Since many customers have requirements for landed costs, we would like to describe the ByDesign features, that could help to deal with that.

Use case: The company wants to consider additional costs like transportation or customs, when calculating the inventory valuation for purchased materials.

As a prerequisite set the ‘Perpetual Cost Method’ of the purchased products to ‘Moving Average’ in the material master (Valuation tab).

A: In case costs like transportation are invoiced by the same supplier in the same invoice as the procured goods, please do the following steps:

1. Manually add an item to the invoice. Just enter a description like ‘Transportation’. It is not necessary to specify a quantity or a price. A net amount is sufficient.

2. Mark the checkbox ‘Distribute Additional Costs Proportionally’ in the ‘Cost Distribution’ tab of that item.

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3. Post the document.

4. Execute the GR/GI Clearing Run.

B: Now in case a separate invoice for transportation costs is sent by the same supplier or another business party (freight forwarder or others), do the following steps:

1. Create a supplier invoice with an item. Again, a description like”transportation” and a net amount is sufficient.

2. Click on ‘View All’ and change the item ‘Type’ to ‘Additional Cost Debit Item’.

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3. In the ‘Cost Distribution’ tab click on ‘Distribute among other invoices or credit memos’. In the respective pop-up enter a purchase order id or a customer invoice id and click on ‘Distribute’. This adds referenced invoice items that should be corrected (in the sense of adding additional charges). The result of this distribution is displayed in the table on bottom of the cost distribution tab.

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4. Post the document.

5. Execute a GR/IR Clearing Run.

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8 Comments

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  1. Jonathan Phillips

    Hi Stefan,

    This is interesting stuff – we are implementing ByDesign now and landed costs are under a lot of discussion. We would follow process B in 95% of cases where invoices are received from freight forwarders for carriage in charges.

    Can I ask, will your process above add any costs to the items in inventory? Ideally for us, the cost of items in inventory should be the full landed costs so items are comparable. We bring in items (factored & purchased) under different shipping terms so without this the costs are not consistent. Under FOB (free on board) we would pay carriage costs from overseas port to our UK premises. Under CIF (cost insurance and freight) we only pay carriage charges from UK port to our UK premises. You can see how these are very different! We would also want to use landed costs to drive cost of sales so we get a better idea of our margin.

    I know we could use standard costing but I don’t want to lose the functionality of the moving average which is clearly more suitable for our variances in material price.

    If you have any thoughts on this or you know someone who has done this before I would appreciate the chance to discuss it.

    Regards

    Jonathan

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    1. Stefan Resag Post author

      Hi Jonathan,

      following the steps described in my blog the landed costs finally should also update the inventory costs. You have to use moving average as a method and you also need to execute the GR/GI clearing run. Only then the landed costs will be added to the inventory valuation costs.

      Best regards,

      Stefan

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      1. Jonathan Phillips

        Hi Stefan,

        This is potentially very good news – I can see how this process will work beautifully for capturing a proportion of landed costs.

        The business I work for can turn stock very quickly and some parts we import and book into inventory can go straight back out again as sales. It has been known  for goods to arrive and depart again on the same day although this is unusual being that we generally sell from stock. Further to that, our logistics and duty invoices can have a 2/3 week lag from date of receipt of goods. In some scenarios I imagine inventory will have been bought and sold on (in part or in full) before we are able to capture the landed costs and add them to it. I guess in these cases your process would not work for us?

        What is your view on handling “planned” landed costs – is there an alternative way you think we could tackle this in ByDesign? We are talking to our implementation partner in the UK to see what they can come up with but I am interested to know what people have done to overcome this issue assuming – I can’t imagine we are the first company to raise this!

        If you think it may be easier to talk more directly please e-mail me at jonathan@aspenpumps.com

        Thanks

        Jonathan

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        1. Stefan Resag Post author

          Hi Jonathan,

          thanks for your offer to have a more detailed conversation on this. I will contact you as proposed.

          Best regards,

          Stefan

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  2. Stefan Stoegmueller

    Hi Stefan,
    this option B, step 2 is not available for the function “New Customs Duty Invoice”.

    Are you recommending not to use the function “New Customs Duty Invoice” if we want to add the customs costs to our inventory?

    Regards,
    Stefan (2)
     

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    1. Stefan Resag Post author

       

      Hi Stefan,
      have you tried to maintain the purchase order item reference instead in the item of the customs duty invoice?
      Best regards,
      Stefan

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  3. Weerakhan Tantiphaiboontana

    Hi Stefan,

    Thank you very much for very informative blog.
    I am working on receiving the imported free-of-charge goods where we would like to allocate the customs duty cost to this particular item.

    What I did was
    1. Create PO with an item AMT = 0 & Invoice Expected Option = Unchecked.
    2. We post supplier invoice for the other items in PO created in 1. Of course, we cannot have that line item in the invoice as the Invoice Expected Option is unchecked.

    Now that we have another invoice which is the customs duty for that PO item, we would like to allocate this inventory cost to this particular material.

    Please help suggest what we can to achieve this. Otherwise, this cost will go to overhead cost.

    Note that: if the free-of-charge goods is the same material with other line items in PO, the cost could be weighted to those line items. Here, we have free-of-charge material which is not the same as other line items in the PO.

    (0) 

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